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MAGAZINE
STUDIO
SCHOOL

Find the Bottom Line

Lesson 1
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Lesson 2
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Lesson 3
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Lesson 4
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Lesson 5
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Lesson 6
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Lesson 7
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Lesson 8
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Lesson 9
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Lesson 10
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Contributed By Glen Berry

IMPORTANT CONCEPTS
  1. Connect Market value with Production Costs
  2. Do not use indie hits for revenue forecasts
  3. Do your homework through Market Research
  4. What's hot now will not be hot next year.

The amount of money your project will return should be determined by current market conditions. Study sources online, the festivals, film markets and trades (like Variety) to see what pictures are selling and at what price. This initial market research will save you from enormous fundamental problems later on.

It is a very bad idea to look at examples of runaway indie hits and put those numbers in your business plan. It’s irresponsible, naïve and foolish. Every year there is an example of a movie made for peanuts that pulls in millions of dollars in revenue. However, there are also people that win the lottery. By telling investors that they have a chance to make millions with you for a pittance you are on the verge of con artistry and fraud. Usually people who have money are not stupid – if you are pitching your project to someone who is stupid enough to fall for this then you are running the risk of legal problems. If you pitch to a sophisticated investor, they will know it is amateur hour. Most of all, don't do it because it will put you in a bind when you try to make a movie under conditions that are nearly impossible to replicate. It’s bad business for everyone. Don’t do it.

What you should do instead is to find someone in the industry actively involved in the sale of rights to distributors. We’ll talk about distribution deals and the sale of rights later but a good contact can tell you from month to month what is selling and for how much. If you provide them with a few details about your project – genre, rating, and attachments – they can immediately tell you how that would fare in the current market.

A sample conversation:

Producer: “So I have this Kung-Fu comedy/action film. No sex/violence/drugs/profanity. Could be family or teen. What do you think?”

Sales Agent: “Any names [actors with name recognition]?”

Producer: “No.”

Sales Agent: “The market is glutted with product right now. Only 15% of the movies at Sundance sold this year. Nobody is buying right now, everyone is waiting for AFM [The American Film Market]. Showtime was paying $225,000 last year, no they’ll only pay $100-125,000 if anything. Advances are really hard to come by.”

Producer: “Okay. So what about foreign sales?”

Sales Agent: “Evaporated for now. But say, do you have any art action projects? I know some people that would buy anything you had.”

And so it goes. Usually when you make that phone call, you will have a good idea of what the market is like and whether or not you should move with your project or hold. That contact could give you a lead about projects they are looking for but be careful – if it takes you 12 months to produce a project, the market could have changed by then. One thing is certain about the film industry. Whatever is hot now will not be hot a year from now. When all the producers figure out what is hot, they go out and make it. By next year, all their movies will be flooding the market.

This is how you leverage existing relationships to help you shape the framework of your project. That conversation with your contact, including your market research will help you determine where your bottom line number should fall. There are no rules for how much your budget should be, except that it should be less than the revenue you can generate from it. Once you set that number, you are ready to complete a top sheet budget for your business plan. You have to ask yourself if you are capable of raising that amount, but Lesson 5 will help you address that issue.

SUMMARY

  • Make sure that the amount of money will create with the completed picture is greater than the amount of money you budget for your picture.
  • Using independent hit movies to forecast revenues is irresponsible and unrealistic.
  • Market Research is your key to putting real numbers to your revenue forecast and realistic expectations for investors about the return on investment.
  • Producers follow trends and as soon as a trend materializes, everyone hops on the bandwagon. If you follow trends you will be trying to put your project out in a glut of look-alike movies.
MEDIA
Hi-Mid-Low sales projection for micro-budget feature with no name talent.
Sales Projection for feature film with two A name actors.
LESSON
The Business Plan
Building your strategic plan into a form that makes sense to you and will guide you through the production. Taking the plan for your movie and putting it into concrete form.
Business Plan Examples
A critical review of three actual business plans.
Find the Bottom Line
Create the framework around which your project will be build based on the bottom line number for your budget. Market research and current market conditions will determine what you can and cannot do.
Getting Star Power
How to find and work with name talent.
LLC and Operating Agreement
How to create a structure to share ownership of the project with investors, establish voting rights and the authority of the producer and protect the investors from personal liability.